Wen / Sihai

Product / node Finance

On February 27, Buffett released his 57th open letter to shareholders, which showed that since September 2008, BYD, as the eighth largest heavy stock, is currently the only Chinese stock he holds.

Wang Chuanfu, an entrepreneur, is leading BYD through a legendary era.

In the era of manufacturing industry, with the advantage of Chinese labor force and “ignoring” patented technology, Wang Chuanfu successfully introduced BYD, which was established less than a year ago, to the world, defeated Sanyo company of Japan and made “made in China” stand proudly in the world.

In the new energy era, the son of a carpenter and the representative of the first generation of entrepreneurs from rural Anhui wants to compete for business with Tesla leader, Silicon Valley elite musk, and entrepreneurs “Wei Xiaoli” flying on the tuyere of new energy vehicles.

Put aside the legendary business war story, what can he stand from the last manufacturing era to the new energy era? If we say that strong adaptability and “evolution” ability are the characteristics of BYD and Wang Chuanfu, many people will agree. Since 2022, BYD (002594. SZ, 01211. HK) has made frequent new moves, and “high-end” has become a new evolutionary direction.

1、 In February, BYD and other domestic auto companies started a round of price rise to fill the cost rise caused by the decline of national subsidies for new energy vehicles. The short-term sales decline caused by the price rise may not be a worry, but how can BYD achieve its monthly sales target of 100000? After all, this is a height never touched by domestic new energy vehicle enterprises.

Wang Chuanfu came to another crossroads. The valuation of new energy vehicles continues to fall, and it is necessary to inject confidence into the market through high growth revenue. BYD, which is positioned in the low-end market and firmly ranked as the champion of domestic new energy vehicle sales, can not sit on the mountain and watch the tiger fight in the face of the new forces of vehicle manufacturing with increasingly fierce competition - entering the high-end model market with higher profit margin has become a new road.

On February 14, Tengshi Automobile Sales Service Co., Ltd., 100% owned by BYD, obtained the business license. On February 17, BYD group and its BYD automobile upgraded the brand logo. Behind the frequent actions, BYD is releasing the signal of the next transformation.

Can the high-end car that is about to come out support the high growth of BYD and help the dream of a large number of investors who bet behind it?

/ 01 /

The sales volume is up and the valuation is down

It has won the annual sales champion of China’s new energy vehicles for 9 consecutive times and became the first Chinese brand to achieve millions of new energy vehicles offline in 2021. Last year, BYD sold 603783 new energy vehicles, which is still unmatched in China.

BYD has pointed out that its sales target of new energy vehicles in 2022 is 1.1-1.2 million. According to the analysis of industry insiders, the market of new energy vehicles will reach 4.5 ~ 5 million next year. This means that its market share may rise to about 25% next year.

If the sales volume is 1.2 million, it means that the average monthly sales volume of BYD automobile this year needs to reach 100000. Before that, almost no Chinese new energy vehicles have reached this goal.

From January 1, 2022, the subsidy standard for new energy vehicles will decline by 30% on the basis of 2021. The decline of subsidies directly led to the price rise of car enterprises. BYD’s Dynasty and Ocean series models increased by 1000 yuan to 7000 yuan.

The price rise has a direct impact on sales. In January 2022, BYD’s monthly sales volume reached 92788, with a year-on-year increase of 358.4%. Sales fell 19.2% month on month in January. For the problem of less sales in January than in December, Tesla salesperson told the media: “many hesitant customers bought it at the end of last year after hearing that the subsidy was less.”

The short-term sales volume will be directly affected by the price rise, but it still needs to wait and see whether it will have a long-term impact.

According to the statistics of the “Securities Times”, as of February 26, the prices of new energy vehicle enterprises have increased

The decline in sales directly affected the change of share price. On February 25, 2022, BYD was 247.84 yuan / share, down 25.65% from the highest 333.33 yuan / share on October 29 last year. Whether BYD’s share price has entered the “safety zone” or not, the horizontal comparison can bring enlightenment.

In 2021, the P / E ratios of traditional car companies, such as BMW, Mercedes Benz, Toyota and Volkswagen, were 5.3, 5.73, 9.25 and 8.27 respectively. In contrast, new energy vehicle enterprises are as high as 70 ~ 80 times. The new energy vehicle sector, while BYD’s dynamic P / E ratio was as high as 914 times (as of the closing on August 6). The domestic sales of BMW, Mercedes Benz, Toyota and Volkswagen in January can be comparable to the sales level of the whole industry of new energy vehicle enterprises.

The price earnings ratio (PE) reflects the serious mismatch between the revenue and valuation of BYD and other new energy vehicle enterprises. The fall of stock price has its inevitable internal logic. As of February 25, BYD’s price earnings ratio (TTM) was still as high as 221.06 times.

Supporting the stock price is BYD’s performance. In 2021, BYD continued to make efforts under the upsurge of new energy vehicles. In 2021, BYD sold 740100 vehicles, a year-on-year increase of 73.34%. Among them, the sales volume of new energy vehicles was 603800, with a year-on-year increase of 218.30%. Sales directly led to the increase in revenue. In the first three quarters of 2021, the operating revenue was 145.192 billion yuan, a year-on-year increase of 42.58%.

In addition to revenue, look at profit performance. The net profit attributable to the parent company in the first three quarters of 2021 was 2.443 billion yuan, a year-on-year decrease of 28.43%.

Among them, there is another major factor in maintaining BYD’s profits, that is, large government subsidies.

In the past five years (the first three quarters of 2017-2021), BYD has received subsidy income of 1.276 billion yuan, 2.073 billion yuan, 1.484 billion yuan, 1.678 billion yuan and 1.501 billion yuan respectively. According to the government subsidy level obtained by BYD in the first nine months of 2021, the annual subsidy is expected to exceed the previous record of the highest subsidy, that is, the subsidy income in 2018.

As can be seen from the above figure, the net profit will increase significantly in 2020. This is closely related to the development of mask business, not driven by the sales of new energy vehicles.

In short, BYD has the of “increasing income without increasing profit”